Remember Gollum from Lord of the Rings? The Australian federal government is doing a pretty good impersonation of the twisted fictional character, as it wrestles with its own internal demons in trying to put together a credible energy policy, and possibly a clean energy target.

Indeed, energy minister Josh Frydenberg managed to capture those internal conflicts in a single speech on Monday, when he addressed an energy conference in Sydney.

On one hand, he punctured the conservative argument that the renewable energy target required billions of dollars of subsidies to get built.

It’s rubbish of course. As Frydenberg pointed out, projects such as the 530MW Stockyard Hill wind farm are being built at a cost of less than $60/MWh, significantly below the prevailing wholesale price of electricity in the coal and gas dominated state – and this included the generators signing away the LGCs (renewable energy certificates).

Many other wind and solar projects are doing the same thing. In other words, no actual subsidy. Just a mechanism to get them built.

It sets up the bizarre situation where you now have the right wing of the Coalition arguing that a CET is not needed because it would be expensive and renewable subsidies would be a horrendous burden, and the “moderates” defending the lack of a CET on the basis that it is not needed because renewables do not require any subsidy at all.

Something’s not right. And all in the name of protecting Gollum’s “Precious”, which in this case is their precarious hold on power, if not of their senses.

At the same time, Frydenberg then claimed that renewables without storage are a “costly burden”, although he didn’t exactly say how or why.

“While renewable energy advocates quickly seek to justify their subsidies by pointing to emissions as a costly externality it is only fair to point out that renewables without storage are also a costly burden.”

Where are we heading with this? The AFR, in a front page lead, took this to mean that the Coalition government would drop the idea of a clean energy target at all.

But Frydenberg also understands he still needs a mechanism to effect the transition to a low-carbon grid, and to help Australia meet its Paris climate targets, if that’s what the government still intends to do.

The current market structure includes all manner if direct and indirect subsidies to fossil fuels, and as Frydenberg noted, the biggest factor in recent price jumps has been the lack of competition in the market.

“This concentration can affect bidding behaviour as the companies know that their market dominance guarantees dispatch regardless of price,” he said. “While this type of behaviour may technically be within the NEM rules, it is not in the long-term interests of consumers.”

Too right. The best way to address that is, of course, to introduce more competition. And the best way to introduce more competition is to introduce more renewables.

Corporates are starting to understand this, knowing that renewable energy can provide lower cost, and fixed prices for electricity. No longer are they subject to the gaming of the big fossil fuel plants.

And the best way to encourage more renewables is to have a mechanism that, say, aligns Australia’s energy policy with its commitment to the Paris climate target. The good news is that, like the RET, a new mechanism would cost a lot less than people make out. In fact, it will likely cut prices.

Just how Frydenberg puts all this into a coherent policy document remains to be seen. It is one thing to try and satisfy the Far Right climate deniers within the Coalition, quite another to lay out a plan for a cleaner, smarter and cheaper solution.

As Michael Liebreich, the founder of Bloomberg New Energy Finance, has pointed out, baseload – if that is the answer – is a 19th century answer to a 21st century question. Asking wind and solar to resemble coal-fired generators is pointless and expensive. There are smarter ways to deal with this.

Labor leader Bill Shorten, speaking at the same conference, said his party was prepared to cut a deal on a CET, if prime minister Malcolm Turnbull has the courage to put one on the table.

And everyone agrees that something needs to be put on the table: AEMO boss Audrey Zibelman, speaking at the same conference, said some sort of official clean energy target was required to spur further investment in new capacity.

“It’s going to happen anyway, we just need to make sure we have the systems that produce the best outcomes for consumers.”

In the meantime, Labor proposes the creation of renewable energy zones – areas with the right resources, topography and developer interest to drive cost-effective renewable projects.

He also said that the existing National Energy Market rules are “biased in favour of big generators” and are stacked against householders and consumers.

Shorten said a Labor government would seek to “modernise” the rules, acknowledge the role of households and distributed generation, and allow for the Clean Energy Finance Corporation – the government’s so-called green bank – to invest in more generation and more storage.

The COALition is a party at war with itself over energy, climate change and the Paris Agreement commitments. It is a party in paralysis. Is it any wonder then that they can’t develop any serious policies to address those issues. I mean letters to consumers by Christmas from the energy majors, barcodes on energy bills and the frequent tea and biscuit sessions in Canberra hosted by Big Mal is hardly what one calls serious long term policy.The sooner that The COALition stop their rear guard action in ‘saving’ Fossil Fuel usage and wake up to fact that Renewable Energy is the now and the future, then perhaps they can finally do what they were elected to do…provide good Governance for now and for the future.

Robert Westinghouse

The government does not get it…. or is this a plan to fill the pockets of big business with the money of the normal people. Stop talking politics and fix the mess you created. I still say: 1) Increase subsidies on PV (not decrease then as they have done); 2) Increase rebates on Batteries; 3) Increase the feed-in tariff; 4) Stop thinking about coal. This is far cheaper than what they are doing…Oh I forgot – the LNP is for BIG Business. How can I say it with out being rude…Turnbill is a self-centered BAD man.

bedlambay

Looks like Oily Fryberg is soffening up the electorate to drasticaaly scale back an already weakened CET.

Tim Buckley

Unbelievable energy policy paralysis from the Federal LNP, daring the state governments to go it alone. Coal fired power generation has been subsidised in this country for a century – little rehabilitation of massive open pits that will be toxic for ever more, diesel fuel rebates, the grid built to accomodate coal’s outdated centralised dumb one-way electricity system, toxic air pollution, health costs, carbon emissions, coal ash disposal externalities – the list of subsidies and costs externalised on the Australian community from coal and coal fired power generation makes a mockery of Frydenberg’s comments that renewables have to be commercially viable. Absent all the subsidises coal gets, renewables will today win the fight hands-down. No contest. Just ask Newcrest. Or the owners of the record 1GW of new rooftop solar installed this year alone (great podcast Giles / Nigel).
Didn’t Saudi Arabia just just announce another world record low for solar down another 30% yoy @ US$18/MWh!

Julie Mulhauser

Hi Tim, maybe you can explain to me how the Nationals became the party for quarries and gas? It makes no sense to me at all!

Farmers must be rightly furious with the damage mining and onshore gas extraction is doing.

I don’t know much about the Qld Land Court but I read the recent judgement on local farmers Bruce & Annette Currie’s case against GVK/Handcock. It seemed to basically boil down to the judge acknowledging there was inherent conflict between the MRA and the EPA but ignoring the EPA in their judgement, ie you have to crack an egg to make an omelette but not allowing an assessment of whether the omelette is worth making or the egg too valuable to crack!

Farmers must be pulling their hair out over climate change inaction – so why isn’t their party representing their interests?

Tim Buckley

Julie – I agree 100% with your comments. A sellout. I think Giles & Rod Campbell @ TAI have nailed it – the revolving door between politicians and the fossil fuel industry lobbyists combined with political donations. We only have to look at Queensland’s Premier’s CoS – a key Adani lobbyist. How is that not a massive conflict of interest? Funny ‘coincidence’ that Adani just happens to have got a $320m royalty holiday – very generous of Queensland taxpayers to help out a struggling foreign tax haven based billionaire – championed by none other than the Federal ex-Minister for Adani.

Julie Mulhauser

Hi Tim, I have read TAI’s reports too and vested interests seem to be well imbedded at state and federal levels and in both parties.

Whistleblower Simone Marsh’s outline of how the Qld CSG approval process was hijacked is fascinating – as are her persistent efforts to get the matter properly examined, however it still doesn’t explain why the Nationals in particular are vocal boosters for mining & gas even when it clearly goes against farmers interests!

My guess is that their voters are not having much say on policy as they are largely in safe conservative seats. The big risk with this arrangement is that conservative 3rd parties such as PHON and the Shooters Party are vacuuming up protest votes against the Nats and gaining real power – which should worry everyon

Julie Mulhauser

The way I see it – the energy policy mess and over the odds prices on gas and electricity reflect significant imbalances of power.

Governments of both stripes and their regulatory agencies are much less powerful than vested interests. (same observation applies to big pharma, banks, finance sector etc)

With energy and electricity this power imbalance seems less critical because change is happening regardless of policy – it is just messier and less orderly! The current fuss though – is energising Australians to get involved and look ‘what’s under the hood’.

Also on the positive side is the great information out there – in addition to this website! The AEMO twitter feed has links to all their webcasts, documents etc. Their CEO Audrey Zibelman is doing a great job at communicating their message.

It appears less positive though on the gas side. I still can’t find why the Bligh government dropped its proposal to either reserve 10 – 20% of the yield or a field for domestic use. It just seems to have vanished during the approval process – maybe someone can explain it to me!

Which brings me to the scandalously poor approval process for the Qld LNG projects. The projects received approval despite their EIS being labelled ‘insufficient and inadequate ‘ by GeoScience Australia.

Unlike electricity there is no alternative to sourcing gas!

Alex Hromas

Julie just a couple of points most industry uses gas for heating this is a legacy situation from the time when gas was cheap. Here it can be replaced with electricity or concentrated solar as the tomato farm at the head of Spencers Gulf has shown, using concentrated solar to distil sea water . Where gas is used as a feedstock for chemical processes such as fertilizer or plastics there is no easy substitute right now the increase in value from gas to finished product here is much higher than in power generation or heating. Our conventional gas supplies are adequate for these industries. The other consideration is that should Turnbull manage to somehow grow a spine and embrace renewables he would probably win the next election hands down. By continuously caving in to the knuckle-draggers he is effectively sealing his fate and that the LNP. This will of course give Mr. Rabbit the chance to prance about afterwards saying “it would have been different if I had been in charge:.

Julie Mulhauser

Hi Alex, thanks for this!

I believe Australia’s best chance of a durable energy policy is one put forward by the LNP because it is unlikely to be overturned by Labor. I am just worried it will be terrible and lock us into paying for HELE stations in marginal regional electorates for the next 50 years!

I don’t think T Abbott comes up with the bright ideas but he certainly is a beneficiary of attacking consensus! I believe the IPA and CIS are the brains trust! Rinehart’s ANDEV gets a lot of ideas over the line too!

Again and again it feels like there is a disconnect between what voters want and what we hear from politicians. I get that unless we are in their ear – we only get a say every 3 years or never if you’re in a safe seat.

I think we need to get in their ear more – I’m hoping it works! Any better ideas welcome!

Alex Hromas

It would be dangerous to assume that Labor would not overturn the existing dopey policy of the LNP, assuming they have one. Labor could easily win on a renewables platform. If we go down this idiotic line then we have a problem Huston. There is no way we will keep to our Paris agreement on climate change. This will cost us dearly in terms of technical expertise lost and we may end up being punished by the world community for failing to meet our obligations. To meet the Paris 2 degC agreement we cannot burn more than 40% of developed coal reserves, note developed i.e. no more new mines or expansions of existing and not more than 70% of developed hydrocarbon reserves. 2 degC gives us a 50% chance of avoiding runaway climate change where the huge areas of permafrost in Siberia and North America start melting releasing both CO2 and methane both contributing to climate change and more melting i.e. a positive feed back loop we loose all control. 50% is playing Russian roulette with 3 rounds in the revolver are you game? To keep to 1.5 degC where we have a 75% chance we need to strop burning coal right now and leave at least 40% of developed hydrocarbon reserves unused. The lunatics in charge in Canberra have totally failed to grasp this and it is beyond Mr. Rabbits comprehension.

Mike Westerman

Well we have Abbott’s position, and that of his denier colleagues in the LNP, loud and clear from his speech in London to a denier organisation. Basically in his view, accepting the science on climate change is akin to looking at animal entrails. Turnbull has the opportunity to draw the line with these extremists and get on with reasonable policy, or be seen as having forsaken the unequivocal stance he previously had.

Michel Syna Rahme

So, are the Lib/Nat Coalition also proposing that with the shelving of the CET and clean energy support mechanisms, that they will be also shelving, for example, the Fuel Tax Credit diesel subsidy to the mining industry and other direct and indirect subsidies to the fossil fuel industry??????????????

A couple of points: first the CET is not a subsidy per se it is a funding mechanism to get renewables built and the money is payed back to the commonwealth. So far this system has been working well. The big subsidies to coal are not the fuel rebate but the costs borne by the community for disruption of surface and subsurface water, air pollution from the mines and lost agricultural land and ecosystems. If you live in a mining area you often find that it is zoned mine subsidence and you have to pay extra for reinforced foundations and council rates to repair infrastructure damaged by it. The mines simply pick up the profits and tell you to bugger off

Robert Comerford

Don’t see them taking away the fossil fuel subsidies any time soon Michel. That would effect their voter base.
Listening to Canavan rant on Q&A reminds me the coalition really have reached ‘peak stupid’.

trackdaze

Engie and AGL and others put lie to the COALition suggestion that existing coal is cheaper than new energy by shutting down operating coal plants and moving to renewables.

Coal is toast both here and abroad. We need leadership to ensure the COALition dont take australia down with coals demise.

Ken Fabian

Frydenberg – “While renewable energy advocates quickly seek to justify their
subsidies by pointing to emissions as a costly externality it is only
fair to point out that renewables without storage are also a costly
burden.”

But Frydenberg’s LNP is doing nothing – zilch – to address that free ride on externalised emissions costs – whilst resisting support for the renewables and storage. And renewables without storage are not yet a costly burden and it’s uncertain that they will; it certainly appears like energy businesses, by their own estimates, think they will both work and be cost effective.

This is all part of an LNP Minister sticking to his party’s failing rhetorical lines – but while they weren’t paying attention the balance has shifted. Worst of all is that the Conservative Right has invested heavily in encouraging their base to believe climate risks are a lie and costs of converting the energy systems are economy destroying. And they have encouraged resistance to any appeals to reason in those voters. If there is one thing politicians will do anything to avoid it’s admitting they made serious misjudgements through failures of due diligence.

Meanwhile, decades of delay, that looked like their friend, has actually seen time start taking out the coal plants that climate concerned folk have been saying need to close.

Mike Westerman

Frydenberg is quickly exposed as dishonest and hypocritical: his boss has commissioned the largest pumped hydro in Australia history, because he thinks firming renewables is a good thing, not a “costly burden”. In fact, if it is such a costly burden, why would MT commission such a big scheme, rather than a small, right sized scheme in SA where the problem is supposedly most pronounced? Besides which, the actual cost of storage is well known: even a Powerwall 2 is cost effective in some regions, but PHES is available for a LCOS of $40-90/MWh, that is, a significantly lighter burden than gas peakers, HELE coal or keeping Liddell going. As my mum would say, only lie if you’re not likely to be found out.

Ken Fabian

Many Australians are so confused they don’t know what to think but they can smell hypocrisy. And recognise desperate indecisiveness.

The government has lost control of the debate. Maybe people can still be satisfied with some gestures but which gestures and to whom? Gestures are no longer enough and blame shifting is losing it’s effectiveness. People no longer believe that renewables are the road to economic
ruination – not in the numbers they did even when Turnbull took over
from Abbott. It’s changing that fast.